Coronavirus: New Government Future Fund to Help Start-Ups

Today Chancellor Rishi Sunak announced a further £1.25bn package as part of the Government’s support for business during the coronavirus pandemic.

The package includes a £500 million investment fund for high-growth companies impacted by the crisis, made up of funding from government and the private sector.

Loans of between £250,000 and £5m will be available on the condition that funding is matched by the private sector.

To be eligible, the companies must have previously raised £250,000 of equity investment in the last 5 years.

SMEs focusing on research and development will also benefit from £750 million of grants and loans. These will be issued by innovation agency Innovate UK.

However, the terms of the proposed Future Fund have been met with concern by business leaders.

B2B Council Member and start-up advisor Bryan Foss said:

The 'Good growth' businesses that the UK needs for a fast economic recovery have to be able to access short-term financial support to maintain momentum through COVID.

A simple loan application with 100% Government guarantee could have supported a large section of the SME marketplace but, unfortunately, the Future Funding scheme has initially developed the type of complex convertible loan proposal you might expect to see from a take-it-or-leave-it lender/investor.

Where the SMEs I work with can raise their minimum required funds from investors, they would not accept the potentially penal costs or control risks inherent in acceptance of these loan conditions.

The UKs SME solution could usefully follow the successful Swiss loan scheme, soften the most difficult terms of this 'Future Fund' scheme to be more SME collaborative - and finally encourage investors back into the market with a short term improvement of EIS tax relief."

DMA CEO, Chris Combemale said:

"The UK's startups are a vital component of the data and marketing industry and play a key role in growing data economies across the UK.

The DMA's Value of Data project based out of Scotland, in particular, sees the huge potential of start-ups in fintech and finance, and it is right that these high-growth and innovative companies are supported, as they will contribute greatly to the industry and wider economy in future.

Schemes like the Future Fund initiative are a welcome addition to the range of support available to business during the coronavirus pandemic, but it is vital that they actually be viable in the help they offer, and not tie them into challenging terms and conditions. As the new Governor of the Bank of England noted, it is time to change tack and offer a blanket offer of business support 100% backed by the Government, where possible."

Today the DMA issued further calls for the Coronavirus Business Loan Scheme to be simplified and for loans to be 100% government-backed.

Full details of the Future Fund scheme can be accessed here.